Rakesh Jhunjhunwala compounded his wealth at an incredible CAGR of 50%+: Ramesh Damani explains how

Rakesh Jhunjhunwala could spot the beginning of every Bull market and would go "all in"

In an earlier interview, Ramesh Damani had pointed out that Radhakishan Damani had the uncanny ability to sense whether the market was turning bearish or bullish (see Radhakishan Damani Can ‘Smell’ The Stock Market. He Is The Steve Jobs Of India: Ramesh Damani)

“He will smell a bear and bull market and tell you within a day, not even a month,” Ramesh Damani had said, with awe in his voice.

Naturally, Rakesh Jhunjhunwala, who prided himself on being Radhakishan Damani's protege, had the same magical ability.

During the depths of the Corona crisis, when there was gloom and doom everywhere, Rakesh Jhunjhunwala was the first one to predict that a great Bull market would resume. "He put all his money into the market even though all other accomplished investors were reluctant to do so, Damani stated.

"His ability to predict the top and bottom of the markets was uncanny. It was a God given ability," he added.

His buying decisions appeared casual but were well researched

Rakesh Jhunjhunwala cultivated the impression of taking buying decisions in a casual manner. In the case of DHFL, he had remarked that if the fundamentals of a stock are as attractive as "Aishwarya Rai", one should buy the stock first and research later (see link)

However, the fact is that there was indepth background research into the stock before any buy ir sell decision was taken, Damani revealed.

Rakesh Jhunjhunwala bought Titan in a distress sale

Titan is the crown jewel of Rakesh Jhunjhunwala's portfolio, worth a colossal Rs 8000 crore.

Ramesh Damani revealed that during the Bear market of 2003 Jhunjhunwala had been approached by the broker of a desperate seller who was anxious to dump a big lot of the stock.

"If you buy 10 lakh of them, the price is 40. If you buy 30 lakh, the price will be 38, and if you buy 50 lakhs, the price will be 36", the seller had pleaded with Jhunjhunwala.

Jhunjhunwala grabbed the entire consignment in the blink of an eye and without any hesitation. He knew instinctively that the market capitalisation of Rs 300 crore was a throwaway valuation for the great Tata company.

Jhunjhunwala had recommended Titan to us as well

It is worth noting that in 2003, a seminar was held by the BSE which was attented by Rakesh Jhunjhunwala, Ramesh Damani and Sanjoy Bhattacharya. Jhunjhunwala recommended Titan on the logic that India would grow at 7 and 8 per cent and that demand for FMCG and consumer durables would grow through the roof. He emphasized that Titan had 55 to 60 per cent of India’s organised watch market and also had a jewelry business. He stated that the size of the Indian jewelry market was roughly Rs 45,000 crore and that there would be an explosion in growth (see Rakesh Jhunjhunwala Said Buy Titan …. At Rs. 65!)

He compounded his wealth at an incredible CAGR of 50%+ (in dollar terms)

It is obvious that achieving the sort of enormous wealth that Rakesh Jhunjhunwala did requires serious compounding. Ramesh Damani computed the CAGR at nearly 50% since 1983. This which is an extraordinary achievement, he remarked.

I also got megabaggers but unlike Rakesh Jhunjhunwala, I could never bet big

In earlier interviews, Ramesh Damani has always emphasized the need to bet big when the circumstances are right. He cites his own shortcoming in this matter (see Ramesh Damani: The Stock Picker Who Could’ve Become A Billionaire).

“The biggest failure of my life is in the inability to dream big” he said candidly.

In the late 1990s, Ramesh Damani was supremely confident about the prospects of two stocks: McDowell (now United Spirits) and Bharat Electronics. He knew that there was such a gigantic and profitable market for liquor in India that McDowell would do very well. Yet McDowell was quoting at such beggarly valuations that you could have bought the entire company at a market capitalisation of only Rs. 200 crores. The same was the story with Bharat Electronics, the blue chip PSU, which held the rights to all multi-billion dollar defence deals.

Ramesh Damani says he had the means to buy 10% of the equity capital of both companies. If he had done that, then, at today’s market capitalisation in excess of Rs. 50,000 crore for both companies, he would have been worth Rs. 5,000 crore. “I would have had to do nothing else. Just two stocks would have made me a Forbes billionaire” he exclaimed. “You will never get seriously rich by buying 2,000 or 10,000 shares. When you get a seriously attractive opportunity, back up the truck with the stock” he had advised.

He repeated the same advice by pointing out that Jhunjhunwala had the ability to go "all in" whenever he was convinced.

"Though other investors of that generation also did very well for themselves, Rakesh rose to the top because he could make huge outsized bets. He was not afraid".

"His ability to take that bet once he was convinced was truly extraordinary," he said.

"I wished I had learnt from Jhunjhunwala," Damani added in a rueful tone.

(Rakesh Jhunjhunwala with (L-R) Madhu Kela, Ramesh Damani, Radhakishan Damani, Darshan Shah and Rashesh Shah)